The Fiscal Cliff: What Would Reagan Do?

Editor's note: A version of this article first appeared at FoxNews.com. It was also co-authored by Michael Reagan.

As President Obama and Democrats urge Republicans to increase taxes, some liberals are curiously invoking the name of Ronald Reagan, the ultimate tax-cutting Republican. They insist that even Reagan was willing to compromise with Democrats on tax increases; thus, John Boehner and Republicans should as well. In truth, this is (at best) a false parallel.

It is correct that Ronald Reagan occasionally compromised on certain tax increases, as he did in 1982. He did so in exchange for promised spending cuts from Democrats that never materialized, to his great regret. Reagan would constantly point back to this broken promise by Democrats.

More importantly, however, President Reagan never budged on income taxes. He flatly refused to increase income taxes, which is what President Obama demands of Republicans right now. Reagan understood that not all taxes, and thus not all tax increases, were equal.

For insight into Ronald Reagan’s thinking, consider what he did in 1981, when faced with a stagnant economy: At his California ranch on August 13, 1981, Reagan, working with a Democratic House and Republican Senate, secured a 25 percent across-the-board reduction in income tax rates over a three-year period beginning in October 1981. Eventually, through this and later cuts, the upper income-tax rate was slashed from 70 percent to 28 percent.

After a slow start through 1982-83, the stimulus effect of the tax cuts was extraordinary, sparking a huge peacetime economic expansion. The “Reagan Boom” produced not only prosperity but—along with the Soviet collapse that he worked to precipitate—helped generate budget surpluses in the 1990s.